Perception and FDIs

Just last week, Moody’s Investors Service said that “President Rodrigo Duterte's deadly drug war and the armed Islamist rebellion pose rising risks to the Philippine economy.” “It should continue to grow robustly though in the short term”, it added. Well, probably, because of our huge spending in infrastructure.

This report is really disturbing. To some extent, it negated that very significant step made late last year by Pres. Duterte when he committed to address the restrictive economic provisions in the Constitution and our laws to ensure attractiveness of the Philippines to foreign direct investments (FDIs). Supposedly, this will be the game changer and will complement the existing policies that have been working for us.

To recall, he signed Executive Order No.10 creating a 25-member body that would study proposals to amend the 1987 Constitution. He emphatically stressed that, “There is a need to review the 1987 Philippine Constitution to ensure that it is truly reflective of the needs, ideals and aspirations of the Filipino people and to ensure that the mandate of the people as expressed thereon, is responsive to changing times.”

In response, some of the country’s most influential business leaders reiterated their call for amending the Constitution to make the country more attractive to foreign investors. In the Pilipinas Conference organized by Stratbase ADR Institute also late last year, Ayala Corp. chairman Jaime Augusto Zobel de Ayala, International Container Terminal Services, Inc. Chairman & CEO Enrique Razon and RFM president and CEO Jose Concepcion III articulated their all-out support on President Duterte’s initiatives to amend the Constitution, especially its economic provisions.

Supposedly, if timely addressed, these will help us in sustaining our present economic growth and propel us towards attaining inclusive growth through more job opportunities. These are job opportunities that can only be created by encouraging fresh investments (whether local or foreign).

But why the apprehensions by Moody’s? First and foremost, we may ask why the president’s deadly drug war will seriously harm the economy in the long run. One educated guess could be because most countries in the first world are critical about the way Pres. Duterte addressed this drug menace. That, most likely, these first world countries might just discourage their wealthy citizens, our potential foreign investors, from investing here. Thus, potentially, we shall lag further behind in attracting FDIs.

Indeed, historically, we’ve been lagging behind in the ASEAN in FDI generation. Statistics from the United Nations Conference on Trade and Development show that from 1980 to 2013, the country accumulated the lowest amount of FDI ($362 billion) compared to Singapore ($6.4 trillion), Thailand ($1.5 trillion), Malaysia ($1.3 trillion), Indonesia ($1.1 trillion), and Vietnam ($591 billion). By all indications, with Myanmar closely following us now, we might even be pushed further down. Lacking in fresh investments, consequently, unemployment woes shall persist and inclusive growth will be consistently missed.

Curiously though, while it is a fact that an armed Islamist rebellion exist and obviously poses a risk, this is so limited and contained. In fact, to say that the entire Mindanao is in chaos is absolutely wrong. It is just, seemingly, a pocket of resistance so contained in Marawi City.

Probably, the issue here is perception. With what is obtaining in Marawi City, the entire country maybe perceived to be in chaos. Added to that fact is the propensity of some citizens to take their views irresponsibly to the social media. Naturally, potential investors are scared away and are looking for other safer destinations.

This is the same situation that the New People's Army (NPA) rebels are taking advantage to. Just last week, the NPAs “attacked and inflicted damage on a solar farm in Cadiz City, Negros Occidental, which is reputed to be the biggest in Southeast Asia and the 7th in the world.” They fired “at the solar power farm owned by the Helios Solar Energy Corporation at Barangay Tinampa-an.”

As reported, “this P10-billion solar farm of Helios Solar Energy Corp. was developed through a partnership between Gregorio Araneta Inc. and Soleq, one of Southeast Asia's largest solar independent power producers, which mother company is Equis.”

With this latest development, the NPAs are trying to paint a picture that rebellion is not just contained in Marawi City but all over the country. Worse, they hit a foreign direct investment. Well, probably, to send a message to potential foreign investors that their investments in the country will never be safe.

Certainly, this will put a dent in our serious efforts of attracting FDIs even if we amend the restrictive economic provisions of our constitution. Obviously, we need to quell these pockets of resistance to gain positive perception.